Farm Estate and Succession Planning

This blog focuses on making complex and difficult topics in estate and business planning understandable and applicable to the reader.

Supplemental Needs Trusts Explained

Mar 29, 2012

A Supplemental Needs Trust (sometimes called a Special Needs Trust) is a specialized legal document designed to benefit an individual who has a disability. A Supplemental Needs Trust can either be "testamentary" (part of a Last Will and Testament) or a "stand alone” document, created during your life. A Supplemental Needs Trust enables a person under a physical or mental disability to have, held in Trust for his benefit, a certain amount of assets provided by the trust makers (you). In a properly-drafted Supplemental Needs Trust, those assets are generally not considered countable assets for purposes of qualification for certain governmental benefits.

Often, professionals will suggest to their clients to create the stand alone Special Needs Trust immediately, and then fund it with a small amount of assets. This would serve as a “test” for the newly created Special Needs Trust, ensuring that it works with the proper authorities (Social Security, IRS, etc.). This test would allow for any necessary changes to take place while you, as the trust creators, are still able to. If you wait to fund the trust until death, without previously “testing” it, it is a difficult ordeal to find out that it is defective for one reason or another. Moreover, you still have all the abilities to further fund the Special Needs Trust at a later date (through your wills). This way, you have assurances that it will work as you intended.

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Required Disclosure Pursuant to IRS Circular 230: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code; or (2) promoting, marketing or recommending to another party any transaction or matter addressed in this communication.